Cantor Fitzgerald Analysts Expecting A Successful Outcome To Yahoo's Sale Process

Yahoo! Inc. YHOO’s core business may not be improving anytime soon, but the stock could see some major short-term upside upon the completion of a buyout deal. According to Cantor Fitzgerald analyst Youssef Squali, management commentary suggesting a deal is imminent was the most important takeaway from the company’s Q2 earnings report.

“We’re maintaining a BUY rating with a $49 PT based on our expectation for a successful outcome to the company’s current sale process, which appears to be coming to a close, and supported by our SOP valuation,” Squali explained.

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Yahoo reported revenue on the quarter (ex-TAC) of $841.2 million, roughly in line with consensus expectations, but down 19 percent year-over-year.

Adjusted EBITDA of $172.4 million came in well above consensus estimates of $148 million. Squali credits aggressive cost-cutting for the beat.

Yahoo’s so-called MaVeNS (mobie, video, native and social) delivered a disappointing 4 percent year-over-year growth on the quarter, once again reflecting that Yahoo’s core business continues to struggle to gain traction. Video was the weakest segment.

Squali believes the company’s 2016 MaVeNS revenue growth targets are now at risk.

Still, with Yahoo’s Alibaba Group Holding Ltd BABA stake representing roughly $31/share in value for Yahoo’s stock, the market is assigning very little value to the company’s core business.

Cantor Fitzgerald’s $49 price target represents roughly 39 percent upside from the stock’s current price.

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Disclosure: The author is long BABA.